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Cisco, Gemini in Web deal
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March 8, 2000: 4:45 a.m. ET
Companies form $4B Internet consulting venture, Cisco invests $835M
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LONDON (CNNfn) - Cisco Systems, the world's largest maker of computer networking equipment, and Cap Gemini of France said Wednesday they are forming a consulting service worth more than $4 billion to focus primarily on the telecommunications and Internet industries.
Cisco will invest $671 million in computer consultancy firm Cap Gemini, which will own 95.1 percent of the new venture. Cisco (CSCO: Research, Estimates) will also buy a 4.9 percent stake in the new venture for $164 million, which reflects a 20 percent discount on Cisco's holding in the new company in recognition of its minority position. Cisco announced earlier this year it planned to make "several strategic investments in consulting firms."
Cap Gemini last week announced plans to acquire U.S. accounting giant Ernst & Young's consulting unit for $11.3 billion.
The new venture is aimed at telecom service providers, suppliers of Internet access sites and media players. It plans to "deliver solutions that will help our service provider and enterprise customers compete and survive in the Internet economy," Don Listwin, executive vice president of Cisco, said in a statement.
Paris-based Cap Gemini will provide up to 4,600 people from its telecom and media unit and also from its data and network design business to staff the venture. Cisco said it will make available a team of network specialists.
The newly formed company will focus on Europe but will also offer services
throughout the U.S. and Asia, the companies said.
"People who are going to make money in the Internet game are those who can combine both infrastructure and business services," Caroline Lamy, Ferri ING Barings analyst told Reuters.
"The operation confirms Cap Gemini's global stature, following its deal with Ernst & Young, and Cisco will help it keep ahead of its European competitors," she said.
The venture will be headed by Alexandre Haeffner, currently chairman of Cap Gemini's Telecom & Media unit, and the board will be comprised of five Cap Gemini directors and one representative from Cisco.
In the event if a takeover, Cisco will have the option to purchase Cap Gemini's share of the new company.
Shares in Cap Gemini shares rose 4.7 percent in early Paris trading to 309 euros ($296.73). Cisco on Tuesday fell 4 1/16 to 132 1/6. 
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Cisco
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